TYBAF

INTRODUCTION
CHAPTER 2 – MUTUAL FUNDS

• A mutual fund is a company that

pools money from many investors
and invests the money in securities
such as stocks, bonds, and short-
term debt.The combined holdings
of the mutual fund are known as its
portfolio.
CLASSIFICATION OF MUTUTAL FUNDS
CLASSIFICATION OF MUTUTAL FUNDS
CLASSIFICATION OF MUTUTAL FUNDS
Q1) ABC MUTUAL FUND CO. HAS GIVEN FOLLOWING INFORMATION;
MARKET VALUE OF ASSETS = RS 3000000
OUTSIDERS LIABILITY = RS 427175
NO OF UNITS = 10000
CALCULATE NAV PU.
Q2) MARKET VALUE OF INVESTMENT OF FUND IS RS 2572825 AS ON 31ST MARCH 2020 AS AGAINST
EXTERNA LIABILITIES OF RS 517250. COMPUTE NET ASSETS VALUE PER UNITS ASSUNIMG THAT THERE ARE IN
ALL 100000 UNITS HELD UNDER THE SCHEME.
Q3 ) FROM THE FOLLOWING INFORMATION EXTRACTED FROM THE RECORD OF RELIANCE MF CALCULATE NAV.
RS IN CRORES
INVESTMENT 5514
LIABILITIES 780
DEBTORS 442
OTHER CURRENT ASSETS 1286
OUTSTANDING EXP 174
NO OF UNITS 300
Q 4) CALCULATE NAV FROM FOLLOWING
RS
ASSETS MARKET VALUE 8800000
CASH 200000
RECEIVABLES FROM SECURITIES SOLD 150000
DIVIDEND INCOME RECEIVABLE 400000
PAYABLE FOR SECURITIES PURCHASED 300000
EXPENSES PAYABLE 250000
SHARES IN ISSUE 650000
Q5) ON 1ST AUGUST MF HAS THE FOLLOWING ASSETS AND ITS MARKET PRICES
SHARES
A LTD - 10000SHRS FOR RS 18.50 EACH
B LTD - 35000SHRS FOR RS 384.40 EACH
C LTD - 10000SHRS FOR RS 263.60 EACH
D LTD - 75000SHRS FOR RS 575.60 EACH
E LTD - 20000SHRS FOR RS 27.65 EACH

NO OF UNITS OF MF IS 500000
CALCULATE THE NAV OF FUND.
Q6) BASED ON ABOVE QUESTION
MR RAJU SENT RS 7500000 CHEQUE TO THE FUND ON 1ST AUG AND FUND MANAGER PURCHASES 15000 SHARES OF
C LTD AND KEEPS THE BALANCE AMT IN BANK. WHAT WILL BE THE NAV?
Q7) Refer Question No 5 & 6;
If the MF on 2nd Aug is as follows, calculate NAV.
Shares Market price
A ltd 21.3
B ltd 417
C ltd 289.80
D ltd 512.20
E ltd 35
Q8 ) MS JAYSHREE THE MANAGER OF TATA MF SUNMITS THE FOLLOWING INFORMATION;

AT THE BEGINNING OF THE YEAR:

NO OF UNITS OUTSTANDUNG 1CR OF RS 10 EACH
INVESTMENT AT COST RS 10CR (MV OF RS 16CR)
OUTSTANDING LIAB RS 5CR

ADDITIONAL INFO:
1. 20000 UNITS WERE SOLD DURING THE YEAR AT RS 24 PU
2. NO ADDITIONAL INVESTMENTS WERE MADE DURING THE YEAR. 50% OF INVESTMENTS HELD
AT THE BEGINNING OF THE YEAR WERE QUOTED AT 80% OF BOOK VALUE.
3. 10% OF INVESTMENTS DECLINED PERMANENTLY 10% BELOW COST
4. OUTSTANDING LIAB AT THE END OF THE YEAR WERE RS 1CR
5. REMAINING INVESTMENTS WERE QUOTED AT RS 13CR

CALCULATE NAV P U AT THE END OF THE YEAR.

SOLUTION :
STEP 1 : CALCULATION OF MARKET VALUE OF ASSETS
INVESTMENT
1. 50% OF INVESTMENT VALUED AT 80% OF BV = 4CR
(10CR * 50% = 5CR * 80% )
2. 10% OF INVESTMENT VALUED AT 10% BELOW COST = 0.9CR
( 10CR *10% = 1CR - 10% )
3. BALANCE 40% VALUED AT = RS 13 CR
TOTAL INVESTMENT = 4CR+0.9CR+13CR =RS 17.9 CR

STEP 2 : CALCULATION OF OUTSIDERS LIABILITIES

LIABILITY = RS 1 CR

STEP 3 : CALCULATION OF NET ASSETS VALUE

NAV = MV OF ASSETS - OUTSIDERS LIAB
= 17.9 CR - 1 CR
= 16.9 CR
STEP 4 : FIND OUT NO. OF UNITS
UNITS AT THE BEGINING OF THE YEAR = 1CR
ADDITIONAL UNITS ISSUED = 0.2CR
TOTAL UNITS AT THE END OF THE YEAR = 1.2CR

STEP 5 : CALCULATE NAV P.U

NAV PU = NAV / NO OF UNITS
= 16.9 CR/ 1.2CR
= RS 14.08 P. U.
Q 9 ) SUNRISE MF ( A GROWTH FUND) HELD THE FOLLOWING SECURITIES AS ON 31ST MARCH 2020

COMPANY NAME NO OF SHARES MARKET VALUE (RS)

A LTD 250000 17
BLTD 100000 25
C LTD 50000 70
D LTD 175000 15
E LTD 270000 12
F LTD 300000 14
G LTD 40000 100

IT HAS VARIOUS OUTSTANDING LIAB OF RS 1525000. APART FROM THIS IT ALSO HAD RS 23315000 IN RESERVES
AND PROFIT & LOSS A/C, RS 1500000 IN CASH AND OTHER CURRENT ASSETS AND RS 2500000 IN OTHER
DEPOSITS. COMPUTE NAV PU. NO OF UNITS IS 100000
SOLUTION :
STEP 1 : CALCULATION OF MARKET VALUE OF ASSETS
INVST IN SHARES
A LTD = 250000 * 17 = RS 4250000
B LTD = 100000 * 25 = RS 2500000
C LTD = 50000 * 70 = RS 3500000
D LTD = 175000 * 15 = RS 2625000
E LTD = 27000 * 12 = RS 3240000
F LTD = 300000* 14 = RS 4200000
G LTD = 40000 * 100 = RS 4000000
TOTAL SHARES /TOTAL INVESTMENT = 24315000
OTHER DEPOITS = 2500000
CASH AND OTHER CURRENT ASSETS = 1500000
TOTAL MV OF ASSETS = 28315000
STEP 2 : CALCULATION OF OUTSIDERS LIABILITIES
OUTSIDER LIAB = 1525000
TOTAL LIAB = 1525000

STEP 3 : CALCULATION OF NET ASSETS VALUE

NAV = MV OF ASSETS – OUTSIDERS LIAB
= 28315000 – 1525000
NAV = 26790000
STEP 4 : FIND OUT NO. OF UNITS
NO OF UNITS = 100000

STEP 5 : CALCULATE NAV P.U

NAV PU =NAV / NO OF UNITS
= 26790000 / 100000
NAV PU = RS 267.90 P U
Q10 ) ON 1ST APRIL MJ MF ISSUES 2000000 UNITS OF RS 10 PER UNIT. RELEVANT INITIAL EXEPNSES INVOLVED WERE
RS 1200000. IT INVESTED THE FUND IN CAPITAL MARKET INSTRUMENTS TO BUILD A PORTFOLIO OF RS 18500000.
DURING THE MONTH OF APRIL IT DISPOSED OFF SOME OF THE INTRUMENTS COSTING RS 6000000 FOR RS
6300000 AND USED THE PROCEEDS IN PUCHASING SECURITY FOR RS 5600000
FUND MGT EXPENSES FOR THE MONTH WERE RS 800000 OF WHICH 10% WAS IN ARREARS. IN APRIL THE FUND
EARNED DIVIDEND OF RS 200000 AND DISTRIBUTED 80% OF REALISED EARNINGS
ON 30TH APRIL THE MV OF PORTFOLIO WAS RS 19800000
CALCULATE NAV P U.
SOLUTION:

1. MV OF INVESTMENTS = RS 19800000
2. CASH
ISSUED 2000000 UNITS @ RS 10 EACH = 20000000
(2000000 * 10 )
LESS : INITIAL EXEPNSES = (1200000)
LESS : CAPITAL MARKET INVESTMENT = (18500000)
ADD : INVESTMENT SOLD = 6300000
LESS : NEW INVESTMENT = (5600000)
LESS : MGT EXPENSES (8L * 90%) = (720000)
ADD : DIVIDEND EARNED = 200000
LESS : DISTRIBUTED (WN 1) = (400000)
(200000 + 300000=500000 *80%)
TOTAL CASH BALANCE = 80000
STEP 1 : CALCULATION OF MARKET VALUE OF ASSETS
INVESTMENT = 19800000
CASH = 80000
TOTAL = 19880000
STEP 2 : CALCULATION OF OUTSIDERS LIABILITIES
OUTSTANDING EXPENSES = 80000
(800000 *10%)
STEP 3 : CALCULATION OF NET ASSETS VALUE
NAV = MV OF ASSETS – OUT LIAB
= 19880000 – 80000
= 19800000
STEP 4 : FIND OUT NO. OF UNITS
NO OF UNITS = 2000000
STEP 5 : CALCULATE NAV P.U
NAV PU = NAV / NO OF UNITS
= 19800000/ 2000000
= RS 9.90 P U
 OBJECTIVES:
A MULTIPLE CHOICE QUESTIONS:
1. The organization that manages the investment is known as
a) Investment Company b) Asset Management Company
c) Management Company d) None of the above

2. On the basis of structure mutual funds are classified as

a) Open Ended Scheme b) Close Ended Scheme
c) Interval Funds d) All of the above

3. A closed end fund has

a) Stipulated maturity period b) Fluctuating maturity period
c) Fixed maturity period d) None of above

4. Growth oriented schemes offer

a) High source of income b) Average source of income
c) Lower source of income d) None of above

5. Growth oriented schemes offer

a) Rapid Capital Appreciation b) Slow Capital Appreciation
c) Average Capital Appreciation d) None of above
6. Debt schemes invest in
a) Bonds b) Equity Shares
c) Preference Shares d) None of shares

7. Hybrid schemes invest in

a) Equity Shares b) Debentures
c) Equity Shares and Debentures d) None of the above

8. The value calculated to measure net assets

a) Net Asset Value b) Yield Value
c) Rate of Return d) None of the above

9. The advantage of investing in mutual fund is

a) Diversification b) Liquidity
c) Convenience d) All of the above

10. Mutual fund investment are

a) Highly Liquid b) Less Liquid
c) Not Liquid d) None of the above

11. Mutual fund costs include

a) Operating Expenses b) Sales Charges
c) Advertising Charges d) Both (a) & (b)

12. Various measures of portfolio performance include

a) Sharpe’s Ratio b) Treynor’s Ratio
c) Jensen’s Differential Measures d) All of the above
B. State whether the following statements are True or False :

1. The organisation managing investment is known as asset management company.

2. Closed end fund has fluctuating maturity period.
3. Growth oriented schemes offer higher income.
4. Growth oriented schemes offer lower income.
5. Growth oriented schemes offer rapid capital appreciation.
6. Debt schemes invest in equity shares.
7. Debt schemes invest in bonds.
8. Hybrid schemes invest in equity shares only.
9. Hybrid schemes invest in debentures only.
10. Liquidity is the benefit of investing in mutual funds.
I1. Operating expenses and sales charges constitute mutual fund cost.
C. Match the following columns :

Column ‘A’ Column 'B

1. Mutual Funds a) Stipulated Maturity Period

2. Closed End Fund b) High Income

3. Growth Oriented Scheme c) Managed by Asset Management Co.

4. Debt Schemes Invest in d) Bonds

5. Hybrid Scheme e) Equity Shares & Debentures

6. Mutual Fund Investment f) Less Liquid

g) Highly Liquid